11I DECIDED NOT TO LEARN HOW TO PLAY THE PIANO BECAUSE I HEARD IT TOOK TEN YEARS TO LEARN TO PLAY IT WELL UNFORTUNATLEY, I MADE THAT DECISION TEN YEARS AGO 12How Inflation Erodes Your IncomeFuture Purchasing Power of 1,000at 2 inflation at 4 inflation 13Inflation And Its Impact On PricesMENU ITEM 1967 TODAYHamburger 0.20 1.15 Cheeseburger 0.25 1.25 French Fries 0.20 0.95 Milkshake 0.20 1.45 Soft Drinks 0.10 0.99 Coffee 0.10 0.75 Smiles Free Still Free 14Canadas Demographic RealityNumber of Births in Canada By Year1994Year 15Provincial Health Care Spending by Age and Sex Canadian Average, 2000current dollarsage groupSources Canadian Institute for Health Information 2000 16Inflation and Political IssuesAs all levels of government search for revenues

Utilities

Property Taxes

Income Taxes

Estate Taxes

Dental and Medical Costs

17Inflation and Political IssuesAs all levels of government search for revenues

Utilities

Property Taxes

Income Taxes

Estate Taxes

Dental and Medical Costs

Prescription Drugs

18Inflation and Political IssuesAs all levels of government search for revenues

Utilities

Property Taxes

Income Taxes

Estate Taxes

Dental and Medical Costs

Prescription Drugs

Health Care Premiums

Long Term Health Care Costs

19Two Key ContentionsThe Baby Boomers will use retirement assets to pay for those services that, today, we take for grantedThe government will move to a system of taxing assets as well as income 20Advisor Opportunity

Diversify assets by type, geography and

tax treatment

Shelter taxable growth through

Unrealized capital gains

Investment funds set up as corporations

Cash value life insurance

Position to receive varying types of

taxable income

21The Quality of Personal Financial AdviceDalbar Inc Market Research

85 Want investment advice

80 Want advice on minimizing taxes

70 Want the highest investment returns

64 Want a complete financial plan

63 Want help in defining their goals

22

In 1996, fewer than 35 of tax filers made an RRSP contribution of any kind

There is over 216,000,000,000 in unused

RRSP contributions

Source Revenue CanadaSource KPMG Consulting 1998 23The RealityA recent survey of over 1,200 Canadians , by a major financial institution, revealed the following

21 have not started to save for retirement

51 have saved less than 30,000

33 have saved more than 100,000

7 have saved more than 400,000

62 expect to work to age 65 out of necessity

72 do not have a financial plan even though

48 use a financial advisor

Source The Financial Post 24Five Stages of Retirement Planning

Accumulation

Positioning

Income Structure

Disposition

Distribution

25What Is Different About This Market?

Planning driven

Money driven

People are seeking our services

Client loyalty / retention is exceptional

AND 26According To The Globe and Mail

700,000,000,000

of investable assets are in the hands of Canadians over the age of 55

27The Retirement Income Market,Areas of Specialized Knowledge

1. Income Structure

2. Investment Portfolio

3. Health Risk Management

4. Wealth Transfer

5. People

28Changing FactorsMale Age 657.5 YrsOnly a few retirement years to fundCPP commences10 YrsAppreciating real estate valuesHigh nominal interest rates14 YrsExcessive taxationExcessive Government borrowingNone of the above apply in the same manner 29Retirement Income Sources 30Opportunity

Concern over viability of CPP / OAS

Rarity of pension plans

There is an increased need for planned saving through RRSP and Non-RRSP vehicles

This money MUST be intelligently invested if targets are to be reached

31The Two Factors From Two PerspectivesReturn

Accumulation

Retirement

Income

RiskRiskReturnIn the retirement market, there is an incredible opportunity in risk analysis / risk management 32Becoming A Risk Manager

Capital Loss

Investment Loss

Purchasing Power Loss

Health Related Loss

Tax Loss

33Investment Results

Investment returns

Investor behaviour

34Our Consulting Role

It is the same for investment portfolios as it is for structural planning

We are simply trying to help the client reduce the number of unknowns

Involve them so they will understand

35Most Common and Costly Mistakes Made by Investors

More time spent picking funds than on asset allocation

Lack of discipline / impatience

Unrealistic expectations

Trying to time the market

36Investor Vs. Investment Returns

Mutual Fund Investors earn far less than reported returns, due to their behaviour

SP return 1984-1997 17

Fund investor returns 6.7

Average fund retention 3 years

Conclusion

-In their attempt to cash in on impressive market gains, investors jump on the bandwagon too late and switch in and out of funds trying to time the market

-By not remaining invested for the entire period, investors do not benefit from the majority of market appreciation

Dalbar Inc.

Investor Behaviour Study, 1997

37Most Common and Costly Mistakes Made by Investors

More time spent picking funds than on asset allocation

Lack of discipline / impatience

Unrealistic expectations

Trying to time the market

Chasing returns, buy high and sell low

38Advisors Are No Better !

January 01 2001 - July 31, 2001

AGF Mutual Funds 2,000,000,000 net sales

International Value70 Fidelity Mutual Funds 1,000,000,000 net sales 39Most Common and Costly Mistakes Made by Investors

More time spent picking funds than on asset allocation

Lack of discipline / impatience

Unrealistic expectations

Trying to time the market

Chasing returns, buy high and sell low

Expecting all investments to perform positively at

the same time

40Insight Pool Performance1 Year Returns To June 30, 2000

Canadian Value 49.57 Global Equity -3.1

Canadian Growth 21.54 Global Equity RSP 2.82

Canadian Dividend 27.85 Global Small Cap 24.37

Canadian Small Cap 19.84 Cdn High Yield Inc -0.67

U.S.Value - 12.56 Cdn Fixed Income 3.30

U.S. Growth 10.86 Global Fixed Inc - 0.46

International Value 20.28 Money Market 4.72

International Growth 37.51

Source C.I. Mutual Funds 41Most Common and Costly Mistakes Made by Investors

More time spent picking funds than on asset allocation

Lack of discipline / impatience

Unrealistic expectations

Trying to time the market

Chasing returns, buy high and sell low

Expecting all investments to perform positively at

the same time

Expecting a managers investment approach to work

all the time

Not enough proper diversification

42True Diversification Includes ...

Different Asset Classes

Different Assets

Different Geographical Content

Different Management Styles

43Exploring the Efficient FrontierYou are not here !High Volatility 44The Three Most Difficult Things To Do

51Your health is your wealthIt may be your health that destroys your wealth 52REASONS FOR RETIRING

Source Statistics Canada General Social Survey, 1994 53Major Causes of Death in 1900Pneumonia Tuberculosis Enteritis Stroke Heart Attack Nephritis Accidents Infancy Cancer Senility 54Major Causes of Death in 1993Heart Disease Cancer Stroke Accidents Chronic Pulmonary Pneumonia / Influenza Diabetes Chronic Liver / Cirrhosis Arteriosclerosis Suicide 55Critical IllnessMajor costs of dealing with an illness that are borne by you 1. Adapting your residence for special needs 2. Paying for private care at home or for a care facility per diem 3. Seeking more immediate medical treatment 4. Paying for experimental or alternative medical treatments 5. Seeking the best physicians and facilities to treat your illness6. Covering the costs of extended travel or relocation 7. Paying the costs of drugs and treatments not covered under provincial plans 56The Complete List of U.S. Medical Facilities That TakeCanadian Money At Par

1.

2.

3.

4.

5.

57Using Your Own DollarsFor Critical Illness Costs

To get 1.00 U.S. requires C1.50

From RRSP it requires 2.00 to get

1.00 After Tax

To get 1.00 U.S. , after-tax, requires

3.00 from your RRSP

So, an 80,000 U.S. procedure will take

240,000 of RRSP assets

58

If I could show you a way to have access to the U.S. healthcare system for 4 or 5 dollars a day, would you be interested?

59Some Points To Address

What do think of the current state of the Canadian Health Care System?

This is as good as it is going to get.

There is a two-tier system already in place. Get care here or go the U.S.

60Providing You With A Choice When Critical Illness StrikesYour Only Choices to Cover Expenses May Be1. Use retirement asset (RRSPs, Savings etc.) 2. Sell fixed assets ( House, Cottage, Valuables) 3. Settle for what treatment is available and when it is available 4. Impact other family members financially and emotionally 61Critical Illness Coverage1. Allows people to make choices 2. Protects lifestyle of you and spouse 3. Refunds all premiums at death if no prior claim has been paid The Canadian Health Care System is not going to get any better ! 62

Always be nice to your children

because they are the ones who will choose your rest home

Phyllis Diller 63Do The Following Reflect Your Feelings and Priorities?

I DO WANT TO

Continue to enjoy a certain quality of lifestyle

Ensure my spouse can enjoy retirement

Be able to make choices

Maintain my independence and dignity

Be able to have access to the amount of care and the type of care that I will need

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